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FINANCING REQUIREMENTS

  1. Must be 18 years of age or older.
  2. Must have a valid driver license.
  3. Must provide verifiable proof of income. Most recent last 2 paystub not to exceed 30 days old.
  4. Must get a credit check from all 3 bureaus and complete a credit application. (Having bad credit does not automatically disqualify you. Please contact a customer service representative for more information.)
  5. Must have full coverage insurance with a $500.00 comprehensive and collision deductible for the duration of your contract.
  6. GHW Auto Sales must be listed on your policy as the lienholder for the duration of your contract. Insurance binders must be email to [email protected].

Please note that failure to meet all requirements will result in a credit application denial or repossession. You will be directed to the pull your credit report from all 3 bureaus. Make sure that there is no lock or freeze on your credit report at the time of applying. In the event that there is it may cause a delay in applying. Credit reports are free with a $1 charge to access all 3 credit bureaus score.

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FAQ

When checking your credit to purchase a car, there are several finance and credit requirements that both lenders and consumers need to be aware of. Here’s a breakdown of typical requirements for the car-buying process:

1. Credit Score Requirements

  • Good Credit Score: 700 and above. With a credit score in this range, you are likely to receive competitive interest rates, and you might qualify for larger loan amounts with favorable terms.
  • Fair Credit Score: 650–699. You may still qualify for a loan but might receive higher interest rates.
  • Poor Credit Score: Below 650. You may face difficulties getting approved for a loan or might need a cosigner. Interest rates will be much higher, and your loan options may be limited.

2. Debt-to-Income (DTI) Ratio

  • The DTI ratio compares your monthly debt payments to your gross monthly income. A lower ratio is better and indicates you’re less likely to default on a loan.
  • Ideal DTI: 36% or lower. However, some lenders may accept higher ratios with a co-signer or a larger down payment.

3. Employment and Income Verification

  • Lenders often require proof of stable income and employment to ensure that you can make regular car loan payments.
  • Typical Documents Needed:
    • Recent pay stubs (usually the last 30 days).
    • Tax returns (if self-employed).
    • Bank statements (sometimes).
  • Minimum income requirements vary, but typically a lender might expect at least $1,000–$2,500/month in verifiable income.

4. Down Payment Requirements

  • While a down payment isn’t always mandatory, making one can improve your chances of approval and reduce your loan amount.
  • Ideal Down Payment: 10-20% of the car’s purchase price. The larger the down payment, the less risky you appear to lenders.

5. Loan Term Length

  • Loan term lengths typically range from 12 to 18 months, with 24 months being a common choice. Longer terms may result in lower monthly payments, but you’ll pay more interest overall.

6. Vehicle Age and Condition

  • Lenders may have requirements regarding the age and condition of the car you intend to purchase.
  • Age Limit: Cars older than 10 years may be harder to finance.
  • Mileage Limits: High-mileage cars could also face higher interest rates or tougher approval.

7. Co-signer Requirements

  • If you have poor credit, a co-signer with good credit may increase your chances of approval.
  • The co-signer would be responsible for the loan if you default, which reduces the lender’s risk.

8. Credit Report Check

  • Lenders will perform a hard inquiry on your credit report to assess your creditworthiness.
  • It’s essential to review your credit report before applying to ensure there are no errors and that you understand your current financial situation.
  • Credit Report Requirements:
    • Lenders typically want to see your full credit history, including any past auto loans, mortgages, or credit card debt.

9. Pre-Approval Process

  • It’s often a good idea to get pre-approved for a car loan before going to the dealership. This can help you understand what loan terms and rates you qualify for, giving you more negotiating power.
  • Pre-approval will typically involve a credit check and submission of financial documents.

10. Insurance Requirements

  • Lenders may require you to have comprehensive and collision insurance coverage for the car during the term of the loan.
  • The amount of insurance may need to cover the loan balance or the full value of the car.

11. Additional Fees and Costs

  • When buying a car, you should also factor in other costs that could affect your financing:
    • Sales tax.
    • Title and registration fees.
    • Dealer fees (if applicable).
    • Insurance premiums.
    • Warranties (if applicable).

12. State-Specific Regulations

  • Be aware that the requirements for credit checks, loan terms, and car purchases may vary depending on your state. Some states have specific regulations related to interest rates, loan terms, or car-buying contracts.

Tips Before Applying for Car Financing:

  1. Check your credit: Make sure you understand your credit score and credit report.
  2. Shop around for rates: Compare interest rates from different lenders (banks, credit unions, or online lenders).
  3. Prepare documents: Have income verification, proof of residence, and any other documents ready.
  4. Consider a co-signer: If you have poor credit, a co-signer can help you secure better loan terms.

Being prepared with all this information can make the car-buying process smoother and help you secure a loan that fits your financial situation.